By Jonathan Davies

Online retail giant, Amazon, will face a formal investigation into alleged tax avoidance in Europe by the European Commission.

The Commission will probe Amazon's tax agreement with Luxembourg. It believes the agreement could amount to state aid, which is illegal under EU rules.

The Commission said Amazon's European profits "are recorded in Luxmebourg, but are not taxed in Luxembourg".

Tech giant Apple was recently told it would be investigated for a similar agreement in Ireland.

"It is only fair that subsidiaries of multinational companies pay their share of taxes and do not receive preferential treatment which could amount to hidden subsidies," said Joaquin Almunia, EU competition commissioner.

Amazon, like Apple and the Irish government, denied any wrongdoing in a statement. It said: "Amazon has received no special tax treatment from Luxembourg, we are subject to the same tax laws as other companies operating here."

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